CFA Level 1

Financial Ratios Sheet

By AnalystPrep.com
Activity Ratios

Activity ratios measure how efficiently a company performs day-to-day tasks,

such as the collection of receivables and management of inventory. The table
below clarifies how to calculate most of the activity ratios.
Liquidity Ratios

Liquidity ratios measure the company’s ability to meet its short-term

obligations and how quickly assets are converted into cash. The following
table explains how to calculate the major liquidity ratios.
Solvency Ratios

Solvency ratios measure a company’s ability to meet long-term obligations.

Subsets of these ratios are also known as “leverage” and “long-term debt”
ratios.
Profitability Ratios

Profitability ratios measure the company’s ability to generate profits from its
resources (assets). The table below shows the calculations of these ratios.
Valuation Ratios

Valuation ratios measure the quantity of an asset or flow (i.e., earnings)

associated with ownership of a specified claim (i.e., a share or ownership of
the enterprise). The following tables show the most of the common valuation
ratios.
Credit ratios

Credit ratios are important tools for analysts when doing credit analysis.
Leverage ratios

Leverage ratios measure the extent to which a company uses liabilities rather
than equity to finance its assets

A Debt is defined as the sum of interest-bearing short-term and long-term debt.

Segment ratios

Segment ratios are important for segment reporting. Remember that a

company doesn’t have to disclose information about all of its segments; they
only need to be disclosed if that segment constitutes 10 percent or more of
the combined operating segments' revenue, assets, or profit.

If the revenue of the reported segments is less than 75% of the revenue of the
entire company, more segments must be reported until the 75% level is
reached.
Performance ratios

Performance ratios are based on CFO. CFO is operating cash flow under US GAAP
or under IFRS, conditional to the fact that the company includes interest paid in
operating activities.